You currently have $1, 000 in an account which pays a nominal rate of interest of...

You currently have $1, 000 in an account which pays a nominal rate of interest of 8% compounded quarterly. You plan to deposit $200 every two months with the first deposit one month from now. What will be the value of the account one month after the eighteenth deposit?
The answer is 5,331.95 but I dont know how to get it.

Solutions

Expert Solution

Nominal rate = 8% Compunded Quarterly

Annual effective rate = (1+ 0.08/4)^4 -1 = 8.24%

Effective rate for 2 months = 8.24% /6 = 1.374% or 0.01374

Future value of the 2 month deposits one month after the eighteenth deposit=

A = 2 monthly deposit = $200

i = 2 monthly interest rate = 0.01374

n = total 2 months period = 18

=>Future value of the 2 month deposits =

=>Future value of the 2 month deposits= $4052.86

Monthly effective interest rate = 8.24% /12 =0.6867% or 0.006867

Future value of the present balance of $1000 after 36 months=$1000*(1+0.006867)^36

=>Future value of the present balance of $1000 after 36 months=$1279.35

henec total FV one month after the eighteenth deposit = $4052.86+$1279.35 = $5332.21

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Q1/ You deposit $1 into a bank account which credits interest at a nominal interest rate...

Q1/ You deposit $1 into a bank account which credits interest at a nominal interest rate of 10% per annum, convertible semiannually. At the same time, your classmate deposits $1000 into a different bank account, which is credited with simple interest. At the end of 5 years, the forces of interest on the two accounts are equal, and your classmate’s account has accumulated to Z . Determine Z. (A) 1800 (B) 1854 (C) 1900 (D) 1953 (E) 2000 Q2/ You...

"You deposit $32,000 in a savings account that pays a nominal interest rate of 4.2% compounded...

"You deposit $32,000 in a savings account that pays a nominal interest rate of 4.2% compounded monthly. 3 years later, you deposit $14,000. 3 years after the second deposit, you make another deposit in the amount of $9,000. 6 years after the third deposit, half of the accumulated funds are transferred to a fund that pays a nominal interest rate of 6.9% compounded quarterly. How much total will you have in the accounts 4 years after the transfer?" SHOW ALL...

You just deposited $25,000 in a bank account that pays a 12.0% nominal interest rate, compounded...

You just deposited $25,000 in a bank account that pays a 12.0% nominal interest rate, compounded semi-annually. If you also add another $3,000 to the account each year over the next five years, how much will be in the account five years from now?

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now? Group of answer choices $18,563.53 $17,679.55 $16,035.88 $16,837.67 $15,234.08

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $3,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now?

You deposit $15,700 into an account this morning. The account pays interest at a rate of...

You deposit $15,700 into an account this morning. The account pays interest at a rate of 7.1 percent per year. How much will be in your account 16 years from today? Group of answer choices $54,911.19 $33,535.20 $61,603.83 $51,818.31 $47,046.92 Sixty years ago, your mother invested $7,200. Today, that investment is worth $379,250.53. What is the average annual rate of return she earned on this investment? Group of answer choices 6.83 percent 7.90 percent 5.92 percent 4.77 percent

Your bank offers a savings account that pays a stated (nominal) interest rate of 10 percent...

Your bank offers a savings account that pays a stated (nominal) interest rate of 10 percent per year, compounded semiannually. Requirement 1: If you deposit $15,000 today into this account and leave it invested for 5 years, how much will you have in the account at the end of Year 5? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Account Balance $ Requirement...

Your bank offers a savings account that pays a stated (nominal) interest rate of 12 percent...

Your bank offers a savings account that pays a stated (nominal) interest rate of 12 percent per year, compounded quarterly. Requirement 1: If you deposit $8,000 today into this account and leave it invested for 6 years, how much will you have in the account at the end of Year 6? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Account Balance $ Requirement 2: What...

You are considering investing in a bank account that pays a nominal annual rate of 7%,

You are considering investing in a bank account that pays a nominal annual rate of 7%, compounded monthly. If you invest $3,000 at the end of each month, how many months will it take for your account to grow to $150,000?An uncle of yours who is about to retire wants to sell some of his stock and buy an annuity that will provide him with income of $50,000 per year for 30 years, beginning a year from today. The going...

2. Suppose you decide to deposit $14,000 into a savings account that pays a nominal rate...

2. Suppose you decide to deposit $14,000 into a savings account that pays a nominal rate of 15.60%, but interest is compounded daily. Based on a 365-day year, how much would you have in your account after four months? (Hint: To calculate the number of days, divide the number of months by 12 and multiply by 365.) $14,303.99 $14,451.45 $14,746.38 $15,041.31 3. In 1626, Dutchman Peter Minuit purchased Manhattan Island from a local Native American tribe. Historians estimate that the...

Subjects